Justia Bankruptcy Opinion Summaries

Before his daughter (Julie) filed her chapter 7 bankruptcy petition, Wood opened bank accounts in her name with himself as custodian or joint account holder. He, his wife (Margaret), Julie, and another daughter, Jennifer, also held interests in a real estate joint venture. Wood admitted that the transferred money out of the accounts he controlled because Julie’s ex-mother-in-law and principal creditor (Gerstenecker), wanted to collect on a judgment. He removed Julie from the Joint Venture.The bankruptcy court denied Julie's motion to convert to Chapter 13. The trustee filed a complaint against Wood, Jennifer, and Margaret seeking to avoid and recover the transfers on preference and fraudulent conveyance theories. The bankruptcy court refused to approve a settlement of that proceeding, citing the paltry recovery for Gerstenecker, The defendants failed to raise a genuine issue as to any material fact regarding Julie’s ownership in the bank accounts, her share of the Joint Venture, and other elements of various claims under 11 U.S.C. 544, 547, 548, 550. The Sixth Circuit Bankruptcy Appellate Panel affirmed. The bankruptcy court properly entered summary judgment regarding the transfers of the bank accounts and the Joint Venture on the theory of actual intent to hinder, delay, and defraud Gerstenecker. View "In re: Wood" on Justia Law

PIRS Capital, LLC (“PIRS”), appeals the district court’s order that affirmed the bankruptcy court’s April 2021 order denying PIRS’s motion to set aside a January 2018 default judgment in the amount of $157,214. PIRS argues it is entitled to this extraordinary post-judgment relief because the bankruptcy trustee did not properly serve her adversary's complaint seeking recovery of preferential transfers. PIRS relies on provisions of Rule 7004(b)(3) of the Federal Rules of Bankruptcy Procedure, the bankruptcy counterpart to Rule 60(b) of the Federal Rules of Civil Procedure.   The Eighth Circuit affirmed. The court held that here, consistent with Espinosa, the bankruptcy court and the district court concluded the bankruptcy court had at least an arguable basis for jurisdiction. First, the trustee arguably complied with Rule 7004(b)(3) by serving PIRS in the manner directed in its Proof of Claim, a direction reinforced by the trustee’s diligent research of PIRS on the DOS website. Second, the trustee sent the summons and complaint by certified mail, return the receipt requested and received the receipt showing the summons and complaint was actually received by a PIRS employee at its Suite 403 address. The Supreme Court in Espinosa expressly stated that receiving actual notice “more than satisfied [PIRS’s] due process rights.”   Further, the court wrote that even if Rule 60(b)(6) relief is not precluded under Kemp, it agrees with the district court that “the circumstances that led to PIRS’s failure to defend were of its own making [and therefore] PIRS cannot establish the existence of exceptional circumstances” that warrant Rule 60(b)(6) relief. View "PIRS Capital, LLC v. Renee Williams" on Justia Law

Appellant Sanare Energy Partners, L.L.C. agreed to purchase a mineral lease and related interests from Appellee PetroQuest Energy, L.L.C. Later, PetroQuest filed bankruptcy, and Sanare filed an adversary suit in that proceeding. Sanare argued that the lack of certain third-party consents rendered PetroQuest liable for costs associated with some “Assets” whose transfer the sale envisioned. The bankruptcy court and the district court each disagreed with Sanare.   The Fifth Circuit affirmed. The court explained that the Properties are “Assets” under the PSA, including section 11.1, even if the Bureau’s withheld consent prevented record title for the Properties from transferring to Sanare. This conclusion is plain from the PSA’s text, which excludes Customary Post-Closing Consents such as the Bureau’s from the category of consent failures that alter the parties’ bargain. Consent failures that do not produce a void-ab-initio transfer also do not alter the parties’ bargain, so the Agreements, too, are Assets under the PSA’s plain text. View "Sanare Energy v. Petroquest" on Justia Law

The First Circuit dismissed certain Credit Unions' challenge to the district court's rejection of their objections to the Modified Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Public Buildings Authority (the confirmation order) and the findings of fact and conclusions of law in connection with the confirmation order (the FF/CL), holding that dismissal was warranted.The final debt restructuring plan at issue in this appeal was the product of evolving plans about how to resolve the initial petition for debt restructuring filed by Puerto Rico's Financial Oversight and Management Board on behalf of the Commonwealth and several of its agencies and instrumentalities pursuant to Title III of the Puerto Rico Oversight, Management, and Stability Act. Six Credit Unions appealed to challenge the confirmation order and FF/CL. The First Circuit dismissed the Credit Unions' challenges, holding that because the Court has now affirmed the dismissal of the Credit Union' adversary claims, the appeal from the confirmation order and the FF/CL was moot. View "Financial Oversight & Management Bd. For Puerto Rico v. Cooperativa de Ahorro y Credito" on Justia Law

The First Circuit affirmed the judgment of the district court dismissing the claims brought by six Credit Unions against the Commonwealth of Puerto Rico and several of its agencies and instrumentalities, holding that the district court properly dismissed the claims.In this adversary proceeding brought as part of broader proceedings underway to restructure the Commonwealth's debts under Title III of the Puerto Rico Oversight, Management, and Stability Act, the Credit Unions argued that Defendants induced and forced them to invest in worthless government-issued securities and that Defendants failed to disclosure their knowledge that these would be losing investments. The district court dismissed the claims. The First Circuit affirmed, holding that the Credit Unions' claims were properly dismissed. View "Cooperativa de Ahorro y Credito Abraham Rosa v. Financial Oversight & Management Bd. for Puerto Rico" on Justia Law

The First Circuit affirmed the judgment of the district court affirming the ruling of the bankruptcy court that the tax liabilities relevant to this appeal had not been discharged, holding that, under the subjective version of the so-called "Beard test," Appellant never filed "returns" for the tax years at issue.The IRS assessed tax believed to be due from Appellant, including penalties and interest, for tax year 1997 in the amount of $30,568 and tax year 2000 in the amount of $46,344. Appellant did not pay the overdue taxes and later filed a chapter 13 petition for bankruptcy. In 2017, Appellant received a discharge. At issue was whether Appellant's discharge covered his debts to the IRS. The bankruptcy court concluded that the tax liabilities at issue had not been discharged. The district court affirmed. The First Circuit affirmed, holding that, applying the Beard test that Appellant urged the bankruptcy court to adopt, Appellant's filings did not represent "an honest and reasonable attempt to satisfy the requirements of the Federal income tax law." View "Kriss v. United States" on Justia Law

A Debtor is appealing a bankruptcy court order dated June 30, 2022 (the “Order”) which disposes of a multitude of matters that were before the court. At the core of this appeal are the Debtor’s repeated motions to reopen his case. A bankruptcy court's decision whether to reopen a bankruptcy case is reviewed for an abuse of discretion.    The Eighth Circuit affirmed. The court explained that after reviewing the Order and the underlying record, it saw no need to address every one of the matters addressed by the bankruptcy court. The court wrote that Debtor states in his Appellant Brief that the bankruptcy court “blanket” denied all 27 of his motions, the Order itself belies that accusation – the court based its ruling on a thorough legal analysis of the individual pleadings and why denial of each was appropriate. A few of the matters involve letters or notices on which the Debtor is not seeking relief. With regard to many of the others, the Debtor mischaracterizes the facts or the law. Further, the court explained that the Bankruptcy Court’s analysis of each of the matters it considered in the Order was thorough and legally sound. View "Bryan Reichel v. Mary Jo A. Jensen-Carter" on Justia Law

The Court of Appeals held that, for purposes of New York's Uniform Commercial Code (UCC) 9-406, an "assignee" includes the holder of a presently exercisable security interest in an assignor's receivables.New Style Contractors, Inc. engaged Checkmate Communications LLC as a subcontractor. Pursuant to a promissory note and security agreement, Checkmate could borrow up to $3 million from Worthy Lending LLC. Checkmate granted Worthy a security interest in its assets, and Worthy filed a UCC-1 financing statement against Checkmate perfecting its secured position regarding Checkmate's assets. Worthy then sent New Style a notice of its security interest and collateral assignment in the New Style accounts. When Checkmate defaulted on the note and filed for bankruptcy. Worthy brought this action against New Style pursuant to UCC 9-607, alleging that Worthy was entitled to recover all amounts New Style owed to Checkmate after New Style's receipt of the notice of assignment. Supreme Court dismissed the complaint. The Appellate Division affirmed, concluding that Worthy did not have an independent cause of action against New Style pursuant to UCC 9-607 because the statute does not authorized a secured creditor as distinct from an assigned, to recover from a nonparty debtor like New Style. The Court of Appeals reversed, holding that the language of the statute required reversal. View "Worthy Lending LLC v. New Style Contractors, Inc." on Justia Law

The IRS held a secured claim on the debtor’s real property arising from a tax penalty lien. The debtor claimed a $150,000 homestead exemption in the property under Arizona law. The trustee sought to avoid the tax penalty lien on the debtor’s exempt property and preserve it for the benefit of the estate pursuant to 11 U.S.C. Sections 724(a) and 551.   The Ninth Circuit reversed the district court’s decision affirming the bankruptcy court’s summary judgment in favor of a Chapter 7 trustee who brought an adversary proceeding seeking to avoid an Internal Revenue Service tax lien on property subject to a homestead exemption and to preserve the value of the lien for the benefit of the bankruptcy estate.   The panel held that Section 724(a) concerns the trustee’s avoidance of qualifying liens attached to the property of the estate at the time of distribution. When a debtor exempts a property interest under 11 U.S.C. Section 522, the exemption withdraws that property interest from the bankruptcy estate and, thus, from the reach of the trustee for distribution to creditors. Accordingly, because exempt property is not “property of the estate” which may be “distributed,” a trustee may not avoid a lien under Section 724(a) attached to exempt property which is no longer part of the estate. The panel held that it follows that a trustee is not permitted to preserve the tax lien for the benefit of the estate under Section 551, which provides for automatic preservation of certain avoided liens, including liens avoided under Section 724(a). View "IN RE: SANDRA TILLMAN, ET AL V. LAWRENCE WARFIELD, ET AL" on Justia Law

Pocket Plus, LLC, sued Pike Brands, LLC (“Running Buddy”) for trade-dress infringement of Pocket Plus’s portable pouch. The district court granted summary judgment to Running Buddy and awarded it a portion of its requested attorney fees. Pocket Plus appealed the summary judgment, and both parties appeal the attorney fees award.   The Eighth Circuit affirmed. The court wrote there is no genuine dispute that Pocket Plus’s trade dress is functional and thus not protected by trademark law. To grant trade-dress protection for Pocket Plus would be to hand it a monopoly over the “best” portable-pouch design. Trademark law precludes that. Further, Running Buddy argued that the district court abused its discretion in awarding only a portion of the requested fees. The court found no abuse of discretion in finding that this was an exceptional case. It considered the appropriate law, reviewed the litigation history, held a hearing, and explained its decision. View "Pocket Plus, LLC v. Pike Brands, LLC" on Justia Law